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Town Square

Council's FTTH-related conflicts of interest

Original post made by Jeff Hoel, Midtown, on Mar 8, 2007

Ever since October 24, 2005 (with one exception), whenever Council considers matters pertaining to possibly building a citywide municipal FTTH system, Council Members Kleinberg, Mossar, and Morton have recused themselves.

At City Council's March 5th meeting, before Council considered a matter pertaining to citywide municipal FTTH, here's what happened:

Council Member Kleinberg chose to recuse herself, as usual, in spite of the fact that she doesn't legally have to recuse, to avoid even the appearance of a conflict. She owns Google stock, which she thinks is somehow relevant, and she works for JVSV, which is peddling wireless, which she thinks is relevant.

Council Member Mossar said she had recently been advised by the City Attorney that she didn't really have a conflict of interest, but since over the years she had recused herself re muni FTTH because she thought she did have a conflict, she didn't know anything about the issue, so she wanted to recuse for that reason. (Is that a good reason? When the FTTH-related issue next returns to Council, will it still be a good reason?)

Council Member Morton did not immediately recuse himself. Rather, he sat through staff's presentation, but then said that although the City Attorney had advised him that he didn't have to recuse, he was getting the feeling that maybe recusing would be a good idea, because he did own stock in the telecom incumbents, and surely the telecom incumbents would become relevant to the FTTH project sooner or later. (Normally, if you recuse, you leave the room before Council starts to hear the item.)

The trouble with recusing when you don't really have to recuse is that whenever Council needs 5 votes regardless of how many recusals there are (e.g., whenever the vote is about a resolution or an ordinance or a contract, etc.) EACH RECUSAL COUNTS AS IF IT WERE A NO VOTE. (Worse, whenever Council needs 6 votes regardless of how many recusals there are, e.g., whenever the vote is about a budget amendment ordinance, each recusal counts as if it were a no vote.)

In other words, if you accept that the telecom incumbents oppose citywide muni FTTH, Council members who recuse because they own stock in the telecom incumbents are actually VOTING IN THEIR FINANCIAL INTEREST -- the very thing that recusing is supposed to prevent.

I think this is outrageous. What do others think?

---

I have tried to address this issue privately, with no success. Council Member Mossar did not reply to my email message. (Publicly, she has stated that her conflict stems from a relative's trust fund, over which she has no control; but she hasn't said she had made her divestiture wishes known to the trustee and/or relative.) During the 2005 Council campaign, Council Member Morton said he'd think about divesting his telecom stocks, but he hasn't yet divested. Council Member Kleinberg confirmed that she thinks she's doing the right thing.

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There is a state law to the effect that a person who works for a company that does substantial business with a municipality can't serve on that municipality's City Council, unless the company is a non-profit. In fact, that law was changed in 2004 to allow LaDoris Cordell to serve on the Palo Alto City Council in spite of the fact that she worked for Stanford, which did substantial business with the city and was technically not a non-profit. The change in effect said Stanford was close enough to being a non-profit.

There ought to be a law to the effect that a person who has a significant financial interest in a first-mile telecom company can't serve on a City Council. Such an interest might affect a Council member's ability to serve, not only with respect to the FTTH issue, but also issues like the Utility Users Tax (UUT) and the "100-year" electric/phone/cable undergrounding program.

Failing that, there ought to be a community consensus that it just isn't done.

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From now on, I plan to oppose and not vote for any and all candidates for City Council who have significant financial interests in first-mile telecom companies. Of course, that won't prevent a Council member, once elected, from acquiring such an interest.

Comments

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Posted by JustMe
a resident of Duveneck/St. Francis
on Mar 8, 2007 at 3:05 pm

Why do we want FTTH? I don't understand the need. What does it give us that makes it worth the cost?

Sorry to ask this question, but you sound like you are a major proponent of FTTH and I figure you must have some reason to propose it. I would like to hear it.


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Posted by Chris
a resident of Palo Alto Hills
on Mar 8, 2007 at 3:19 pm

JustMe, thanks for asking the relevant question.

The poster seems to imply that he'd get his FTTH if only the process weren't rigged against him. The fact is that there are a few determined zealots who think the city should pay for a fiber system for them when private companies can't find a profit in it. (And it's also noteworthy that the few cities that HAVE tried to make a go of it are failing.)

It's something the city can't afford to risk when it's having myriad other budget problems.


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Posted by JustMe
a resident of Duveneck/St. Francis
on Mar 8, 2007 at 3:52 pm

I was not being anti-FFTH, I don't know enough about the reasons why you would want it. I am looking for those reasons so that I can understand the issue better.

I have worked with fiber optics quite a bit as a test engineer (and even did a short stint as a test tech during the downturn, testing OC192 tranceivers,) so I am concerned with the issues fiber introduces that have bedeviled me in the past.


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Posted by Anonymous Coward
a resident of Evergreen Park
on Mar 8, 2007 at 10:54 pm

FTTH would be an infrastructure investment that might give certain incumbent businesses an opportunity to leverage the Internet to commercial advantage, but that's not its strongest argument.

Certainly, most consumers don't - and won't - need 100mbps for a long, long time. (there is a counterargument against the latter statement that says that applications often work to fill available bandwidth - that may very well be true, but I haven't seen it in practice in places [like Asia] where fiber is all over the place. In fact, even though they had a choice, most of those in the Community Center test neighborhood didn't opt for more than 20mbps speeds during the FTTH test phase.

One of the cool things about FTTH is that it's symmetrical - i.e. it's the same speed in both directions. Thus, if you want to *send* big files thay really zip along, rather than crawling at a fraction of your download speed when receiving data from the Net. Most of us have upload speeds that are far less than 1mbps, often half that. Those speed discourage consumer innovation on the Net. So, an argument - and argument that I believe is valid - could be made that the incumbent providers limit innovation. Clearly, the incumbents overcharge for what we get, give us poor choice (or forced choice of limited options), and compel us to pay twice - once when we pay our bill, and again as we pay with our attention, having to endure commercials on content venues that we pay to access in the first place. The incumbents gain both ways - they double-dip.

About local businesses: most of those that need high bandwidth can get it, and pay for it. This isn't about commercial innovation, unless we're talking about innovation at the consumer end of the network, or the far fringe edge of the network where things like YouTube and other social network plays have gotten started. The "edge" is becoming far more distributed, so we're going to see more and more innovation coming from there, with many predicting that most content will eventually emanate from there.

High-bandwidth availability *might* encourage and enable locals who want to get something started on Web 2.0 (soon to be Web 3.0, both essentially fancy names for the Net "anytime, anywhere - static, or mobile").

If we can find a vendor that reduces our exposure to risk, I would say "go for it". Let's see what kind of deal we can make. There's no harm in seeing this through.

Frankly, I don't have any problems with Council members who recuse. It's their obligation to be as free of conflict as possible, even if they think the chances are remote. Remember, the incumbents have heavy hands when it comes to litigation. Nobody wants to find her/himself named in a lawsuit (including the city).

One thing I would like to see is more of a regional initiative for FTTH. There are very good local investment revenue models that would work for FTTH, but they would take a serious grass roots effort to get going. Thus, the lukewarm reception that FTTH is getting at the moment; this city already has a lot on its plate - and staff time IS thin, in spite of all the complaining by those who think that city staffers don't do anything.

The JVSV wireless venture is just getting started, and might make a nice template for eventually bringing FTTH to the region.

One thing for sure, American consumers get taken to the cleaners in their use of all communications modalities, compared to consumers in other places. That's a completely different thread, but if most consumers know how much - by comparison - they were being gouged for Internet, Cable, Cell phone, and Wireline services, they would be outraged even more than they are now (telecom is notoriously unpopular as a satisfying comsumer experience, especially as it has pushed the acceptable margins of price inelasticity)


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Posted by Jeff Hoel
a resident of Midtown
on Mar 9, 2007 at 1:26 pm

JustMe,

I would love to discuss with you why I want muni FTTH and what your fiber-related experience and concerns are, but I don't know how to contact you, so would you contact me? I'm in the book.

I'm hoping that posters to the "Council's FTTH-related conflicts of interest" topic will be interested in discussing the conflicts-of-interest issue specifically. (I think it would be great to discuss Council's conflicts of interest issue more generally. For example, three Council members have Stanford-related conflicts, Cordell because she works there, and Klein and Mossar because their spouses do. I'm not asking anyone to quit her job or divorce his or her spouse. But their recusals still count as no votes in many cases. Is that the way we want the system to work?)

At Council's 2-3-07 retreat, Council Member Klein cited a legal term,
"seamless web," which he said means that everything is related to everything else. Nevertheless, I hope we can agree that the merits of FTTH issue is enough different from the conflicts of interest issue to rate its own topic(s) on Town Square, e.g., "City Run High Speed Internet: Fiber to the home YET AGAIN??" from 3-6-07. Thanks.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 14, 2007 at 1:45 pm

Here's another conflict-of-interest story. ( <Web Link> ) On the agenda item considering whether the Stanford Medical Center should be required to pay a development fee for affordable housing, Council Member Cordell had to recuse because she works for Stanford. Had Council Members Klein and/or Mossar been present, they would have been required to recuse because their respective spouses work for Stanford. The recusal and the absences counted as no votes (because 5 yes votes were required to approve the item, no matter how many recusals and absences there were). Stanford wanted a no vote and got what it wanted. There were 4 yes votes, but they were defeated by the 2 no votes.